California Tightens Auto-Renewal Requirements In 2018
Today’s busy consumers tend to rely on household subscription services to simplify life. One purchase agreement with payments that renew automatically allows uninterrupted access to many types of services. The issue arises when consumers do not know how to unsubscribe or exactly how much they will pay after a discounted or free trial period. Many companies bury this information on their website or word the terms in ambiguous ways so that the consumer may not even realize what they are signing up for. For this reason, many states are enacting or updating their Automatic Renewal Laws (“ARLs”) to ensure consumer protection.
Following numerous class action filings under California’s current ARL, the state’s newly enacted Senate Bill 313 puts tougher restrictions on automatic renewals and continuous service providers. The current California ARL was enacted in 2010. The expiring law required auto-renewing consumer contracts to disclose its terms clearly and conspicuously and to obtain affirmative consumer consent before imposing a charge. The law also required these companies to provide an acknowledgment that contains the terms, the cancellation policy and an easy to understand cancellation method.
How Most California Consumers Discover an Issue With Auto-Renewal
After the consumer realizes that they are being charged a recurring fee that they were not informed about, or that the price for the subscription service is differnet than they agreed to, it can become very difficult for them to unsubscribe. Many of the companies named under the California auto-renewal legal claims have been brought about by consumers who argue that it is difficult or impossible to cancel after they identify the charges.
A new California auto-renewal Law will become effective on July 1, 2018, giving retailers time to adapt to the new standards. This new law continues the provisions about clear and conspicuous explanation of any updates to the purchase agreement or price, that will occur after a free trial of gift concludes, and affirmative consumer consent.
In addition to its 2010 requirements for automatic renewal, Senate Bill 313 now requires:
Section 17602 of the Business and Professions Code is amended to read:
(a) It shall be unlawful for any business that makes an automatic renewal or continuous service offer to a consumer in this state to do any of the following:
(1) Fail to present the automatic renewal offer terms or continuous service offer terms in a clear and conspicuous manner before the subscription or purchasing agreement is fulfilled and in visual proximity, or in the case of an offer conveyed by voice, in temporal proximity, to the request for consent to the offer.
(2) Charge the consumer’s credit or debit card, or the consumer’s account with a third party, for an automatic renewal or continuous service without first obtaining the consumer’s affirmative consent to the agreement containing the automatic renewal offer terms or continuous service offer terms.
(3) Fail to provide an acknowledgment that includes the automatic renewal or continuous service offer terms, cancellation policy, and information regarding how to cancel in a manner that is capable of being retained by the consumer. If the offer includes a free trial, the business shall also disclose in the acknowledgment how to cancel, and allow the consumer to cancel, before the consumer pays for the goods or services.
(b) A business that makes automatic renewal or continuous service offers shall provide a toll-free telephone number, electronic mail address, a postal address if the seller directly bills the consumer, or another cost-effective, timely, and easy-to-use mechanism for cancellation that shall be described in the acknowledgment specified in paragraph (3) of subdivision (a).
(c) In the case of a material change in the terms of the automatic renewal or continuous service offer that has been accepted by a consumer in this state, the business shall provide the consumer with a clear and conspicuous notice of the material change and provide information regarding how to cancel in a manner that is capable of being retained by the consumer.
Anyone who has been subjected to violations of California auto-renewal law may be eligible to pursue a legal claim.